What will our relationship with the EU be like after Brexit. I will analyse four different scenarios. Here is a summary table.
Now to the in depth models
Norway (European Economic Area)
Norway are part of the European Economic Area. This means that they are part of the single market. Therefore they don’t have to pay tariffs and are able to be part of the large market. They don’t have to follow the CAP (see EU & I: Trade), the CFP or the European Common Trade Policy.
However they still have to follow EU regulations. If the UK were to become like Norway, they would have to follow 93 of the 100 most expensive EU regulations. However, they would have no say in the regulations because they wouldn’t have any MEPs, or a veto. They wouldn’t be able to vote, but only to lobby other countries. They also have to pay a substantial amount to the EU’s development fund. Every year they pay €656m to the EU. With a bigger population and GDP, the UK can expect to pay plenty more.
Britain would also not have control of their own borders. Part of the single market is the freedom of movement of people. This is a key part of the single market that the EU will not negotiate on. Therefore we do not regain control of our borders, as many leavers say we would.
While we ditch the European Common Trade Policy, we also lose our voice in the market where we send over 50% of our exports. Is this really worth it when USA said we would be back of the line for negotiations and China, who only account for 1% of inwards foreign investment for us?
Switzerland (Bilateral Agreement)
Switzerland make many deals with the EU to keep their place in the market. They don’t have full access to the market and don’t have comprehensive agreements for financial services. They have to follow many rules, also not having any MEPs for influence. They also have to allow for free movement of people. They also contribute to the EU development fund.
The EU hate this relationship. It causes tension between EU member states and Switzerland. Therefor the EU would almost definetely not offer this option to Britain.
Canada (Canada Europe Trade Agreement)
This has been a beacon of hope for Boris. It opens up access between Canada and the EU allowing for trade. They both make different resources so trade benefits both. Canada do not have to pay a contribution towards the EU and do not have free movement of people.
All Canadian products do still have to follow EU regulations. They also have to pay tarriffs on certain farmed goods such as eggs and chicken, making them less competitive in a European market and raising food prices. This would affect Britain far worse than Canada as a greater proportion of our Exports and Imports are traded with the EU. the EU
The UK is very different to Canada. 30 companies represent most of the EU-Canada trade and there is far greater integration politically between the UK and the EU. CETA works to a small scale with Canada. Had it been implemented seven years ago, CETA would only have added 0.08% GDP to the EU. There are very few jobs in Canada relying on EU-Canada trade. Therefore the UK is unlikely to be offered this deal. The deal would really harm the UK economically.
World Trade Organisation (WTO)
Should no agreement be reached, we would trade with the EU using WTO rules. We wouldn’t pay towards the fund, we wouldn’t have free movement, but we would have to pay on tariffs when we import and export goods to the EU:
These tariffs would make the UK uncompetitive when exporting to the EU. Therefore these could really harm farmers and particularly our dairy industry. Prices will be higher and our trading position would be weaker.
The leave campaign have consistently failed to give us an idea of our relationship with the EU in the case of Brexit. The reason is that none of the solutions benefit the UK as much as the current situation. The EEA gives us what we had with no influence over it. The Swiss deal won’t happen. The CETA would throw us into uncertainty and make us worse off in the long run, while the WTO idea would make us less competitive in the EU (where over half of our exports go).
This is my final pre-referendum post. Please remember to go and vote on Thursday. Thank you for reading these posts.
– Swift Economist